Industry Glossary

Private Money – Financing from a private group that is based on the current equity in the home.
Hard Money – Short term loan secured by real estate.
Appraisal – Estimate of property value by authorized person.
Bridge Loan – Short term financing which bridges the gap of other financing.  Also referred to as swing loan or bridge financing.
Broker (real estate) – A real estate broker acts as an intermediary between sellers and buyers.
Closing (Settlement) – When the loan transaction is finalized.
Collateral – For real estate loans, the collateral is the real property used to secure the repayment of loan.
Deed of Trust – A security instrument showing the legal title to real property as security for the repayment of a loan.
Equity – Value of ownership in a home or property that represents the current market value.
Escrow  – A contractual arrangement in which a third party receives and disburses money or documents for the primary transacting parties, with the disbursement dependent on conditions agreed to by the parties.
Exit Strategy – The plan once your hard money loan is due.  There are many options, traditional mortgage,  sell the house, another hard money loan.
Hazard Insurance – Lenders require home buyers to purchase hazard insurance on the property collateralized.
Hud1 – Settlement statement is a standard form which is used to itemize services and fees charged to the borrower by the lender when applying for a loan.
Interest Rate – The amount charged, expressed as a percentage of principal, by the lender to a borrower for the use of assets.
LTV (loan to value) – A ratio of the requested loan amount to the full market value of the property.
Note – A promissory note secured by a specific mortgage loan; it is written promise to repay a specific sum of money plus interest at a specified rate and length of time to fulfill the promise.
Origination – The process of creating a home loan or mortgage.  During the origination process, a borrower submits a variety of financial information to the lender, who uses it to determine the type of loan the borrower is eligible for and what interest rate will be paid.
Point – One percent of the amount of mortgage.
Principal balance – The amount due to satisfy the payoff of the underlying obligation, less interest or other charges.
Servicer – Handles the management of the loan.  They typically process loan payments, track principal and interest paid, manage escrow account.
Underwriting – The process that lenders go through to evaluate the risks related to a particular borrower to set appropriate conditions for loan.

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